The Touchstone Mid Cap Value Fund (Class A Shares, Load Waived) reported a quarter of underperformance relative to its benchmark, the Russell Midcap\u00ae Value Index, for the period ending September 30, 2025. This outcome prompts a deeper examination of the fund's investment methodology and the factors influencing its returns. The fund adheres to a classic value-driven fundamental investment approach, meticulously identifying companies believed to be trading below their intrinsic value through a rigorous five-screen valuation process. This strategic discipline aims to uncover attractively priced securities with strong underlying fundamentals, forming the core of its portfolio construction.
Despite the overall underperformance, specific sectors within the fund demonstrated resilience and positive contributions. Notably, the Information Technology (IT) sector played a significant role, boosted by robust results from holdings such as Lumentum Holdings Inc. and PTC Inc. Conversely, lagging sectors, including Consumer Discretionary, Financials, Energy, and Industrials, were primary contributors to the fund's relative shortfall. The investment team actively navigates these market dynamics by adjusting sector exposures, evidenced by underweighting Real Estate and Communication Services, while strategically adding positions like MCHP, SSB, PKG, and SLB. These adjustments reflect a continuous assessment of sector-specific risk/reward profiles and a commitment to optimizing the portfolio.
Looking ahead, the fund maintains a steadfast focus on identifying high-quality, undervalued companies with strong management teams, substantial barriers to entry, and healthy balance sheets. This forward-looking investment thesis emphasizes a thorough examination of potential downside scenarios for all positions, reinforcing a cautious yet opportunistic stance. In an environment marked by market volatility and debates surrounding AI-driven valuations, the fund\u2019s management believes that such fundamentally sound investments are poised for superior long-term performance, aligning with its core philosophy of delivering value to shareholders.
By consistently adhering to its principles of rigorous fundamental analysis and disciplined portfolio management, the fund aims to capitalize on market inefficiencies and deliver sustained value over time. The emphasis on strong management, high barriers to entry, and solid financials positions the fund to weather economic uncertainties and thrive in the long run, ensuring investor confidence through a commitment to sound investment practices.